Chicago-based aftermarket and recycled auto parts supplier LKQ Corp. says its second-quarter 2021 financial results that reflect strength in a number of key metrics, including total revenue, segment margins and free cash flow.

Dominick Zarcone, president and chief executive officer at LKQ, says, "This performance marks two key milestones as the first quarterly period with EPS (earnings per share) of over $1 and the highest quarterly segment EBITDA (earnings before interest, taxes, depreciation and amortization) in the company’s history. The North America and Specialty segments achieved record segment EBITDA margins in the quarter, and Europe delivered a double-digit margin for the first time since the second quarter of 2016. The European performance further validates the margin targets provided at the start of the 1 LKQ Europe program and gives us confidence that we are on track with the overall goals of the program.”

Quarterly results

LKQ’s second-quarter revenue totaled $3.4 billion, an increase of 30.8 percent compared with the company’s $2.6 billion in earnings in the second quarter of 2020. The company says the gain reflects the annualization of the pandemic impact during the second quarter of 2020.

For the second quarter of 2021, parts and services organic revenue increased 21.9 percent, while the net impact of acquisitions and divestitures decreased revenue 0.3 percent, and foreign exchange rates increased revenue 5.4% percent, for a total parts and services revenue increase of 27 percent, LKQ reports. Other revenue grew 108.5 percent in the second quarter of 2021, driven by higher scrap steel and precious metals prices, the company adds.

LKQ’s net income for the second quarter was $305 million, or 157 percent more than in the comparable period of the prior year. In the same quarter in 2020, the company’s net income totaled $119 million. Diluted earnings per share for the second quarter totaled $1.01 versus 39 cents for the same period of 2020, an increase of 159 percent.

On an adjusted basis, net income in the second quarter of this year was $340 million compared with $161 million in the same period of 2020, a 110.7 percent increase. Adjusted quarterly diluted earnings per share totaled $1.13 versus 53 cents for the same period of 2020, a 113.2 percent increase.

Cash flow from operations totaled $411 million during the second quarter of 2021, and free cash flow in the quarter was $365 million. Cash flow from operations for the six months ended June 30 was $933 million, and free cash flow for the six months ended June 30 was $845 million.

2021 outlook

Varun Laroyia, LKQ executive vice president and chief financial officer, says, “Based on the strong performance in the second quarter and the expected sustainability of the operational excellence initiatives, we are raising the full year outlook for profitability and free cash flow. While inflationary pressures will continue to be a headwind in the second half of the year, we are cautiously optimistic that we have the ability to mitigate these pressures.”

For 2021, LKQ’s management is has revised its outlook, expecting diluted EPS attributable to LKQ stockholders in the range of $3.23 to $3.43 and adjusted diluted EPS attributable to LKQ stockholders in the range of $3.55 to $3.75. The company says it expects free cash flow in the range of $0.95 billion to $1.05 billion and has updated the full year 2021 segment EBITDA margin targets for Europe provided Sept. 10, 2020, to a range of 9.5 percent to 10.3 percent. 

Medalists at the Tokyo Olympics aren’t the only ones taking center stage this summer, the medals are also. This year, medals given to winners at the Summer Olympics are made of recycled electrical devices. 

According to the International Olympic Committee (IOC), approximately 78,985 tons of discarded devices were collected. This includes about 6.21 million used mobile phones, along with digital cameras, handheld games and laptops, all of which were then classified, dismantled and melted down by highly trained contractors.

The effort was part of a collection program called the Tokyo 2020 Medal Project, which began in 2017. The project attracted donations and support from 1,300 educational institutions and 2,100 electronics retail stores across Japan. Donation boxes also were strategically placed across Japan for local donations, according to the IOC. 

Up to 90 percent of Japanese cities, towns and villages participated by setting up donation collection sites where Japanese citizens donated their old electronic devices, reports technology publication ZME Science.

Through the initiative, the Tokyo 2020 Medal Project collected 70 pounds of gold, 7,700 pounds of silver and 4,850 pounds of bronze. The gold alone derived from the project is worth some $2 million, according to ZME Science.

This is not the first time Olympic medals have been made from recycled materials. In 2016, the Rio Olympics awarded bronze and silver medals that were made from 30 percent recycled materials, according to the IOC, while medals for the 2019 Winter Olympics also featured recycled-content medals. 

Using recycled electronics for the medals at the Tokyo Olympics is just one way the organizers of the event have worked to minimize their environmental footprint. Other sustainable practices include:

• using recycled construction debris from temporary housing erected following the Great East Japan earthquake and tsunami of 2011 for the Olympic torches;
• uUsing lightweight recycled cardboard beds made by the Japanese company Airweave for the athletes’ sleeping quarters;
• using mattresses that can be recycled after use; and
• using autonomous electric cars made by Toyota to transport athletes around the Olympic Village.

Packaging Corp. of America (PCA), a packaging producer based in Lake Forest, Illinois, has reported healthy containerboard and corrugated demand in its latest earnings report.

Overall, PCA says it achieved second-quarter 2021 net income of $207 million, or $2.17 per share. Second-quarter 2021 net sales were $1.9 billion compared with $1.5 billion in the same time frame of 2020. The company says earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter, excluding special items, totaled $397 million this year compared with $299 in the second quarter of 2020.

According to PCA’s second-quarter earnings report, the company’s latest earnings included special items expense and income rounding to a negligible impact, while the net income in the second quarter of 2020 included special items expenses of 79 cents per share related primarily to the impairment of goodwill associated with PCA’s Paper segment.

Several expenses were higher in the second quarter. According to PCA, inflation-related increases affected converting costs, and freight and logistics expenses were higher compared with the same time frame in 2020. Additionally, depreciation expense was slightly higher, and Paper segment prices and mix were slightly lower.

Also in the second quarter, the company worked to build up its inventory levels; however, Mark Kowlzan, PCA chairman and CEO says the company’s weeks-of-inventory supply reached a new low for this time of the year ahead of an expected busy second half of the year. He says the company’s Packaging and Paper segments implemented price increases in the second quarter, and the company continues to work on initiatives and capital projects to reduce costs and improve efficiencies at its mills and corrugated products plants. He adds that reducing costs and improving efficiencies will help the company as it navigates logistics challenges with inbound and outbound freight.

Packaging and Paper segment outlook

In PCA’s Packaging segment, total corrugated products shipments and shipments per day were up 9.6 percent in the second quarter of the year over the second quarter of 2020. PCA reports that containerboard production was 1.192 million tons, and containerboard inventory was up 20,000 tons from both the second quarter of 2020 and the first quarter of 2021.

“Our plants achieved a new all-time quarterly record for total box shipments as well as a second-quarter record for shipments per day, both of which were up 9.6 percent compared to last year’s second quarter,” said Tom Hassfurther, executive vice president of corrugated products at PCA, during the company’s second-quarter earnings call July 27.

He said outside sales volume of containerboard was 43,000 tons above the second quarter of 2020 but down slightly compared with the first quarter of the year because of lower export shipments.

“Demand in our Packaging segment remained very strong,” Kowlzan said. “Our mills and plants continued to do an outstanding job of meeting our customers’ needs while managing through certain material and chemical availability issues, a tight labor market, various freight and logistics challenges, as well as the planned maintenance outages at four of our mills during the second quarter.

He added, “The mills executed the planned outages extremely well and, with the help of the No. 3 machine at the Jackson mill, provided our plants the necessary containerboard to achieve an all-time record for total box shipments.”

In PCA’s Paper segment, sales volume was up 21,000 tons in the second quarter of 2021 compared with the second quarter of 2020 and down 24,000 tons compared with the first quarter of the year.

EBITDA excluding special items in the second quarter was $12 million for this segment with sales of $142 million or an 8 percent margin compared with second-quarter 2020 EBITDA of $5 million and sales of $123 million or a 4 percent margin. Kowlzan said volume in the Paper segment was up 17 percent in the second quarter of this year compared with the same time last year when pandemic issues caused the company to take both machines at its Jackson, Alabama, mill down for two months.

Looking ahead to the third quarter, Kowlzan said PCA expects demand will remain strong for containerboard and corrugated products with one additional day for box shipments. He said the company’s Paper segment volume should remain flat in the third quarter, primarily because of the scheduled maintenance outage at the company’s mill in Jackson.

Additionally, he said he expects recycled fiber costs to remain high in the third quarter of the year. “You have to believe with the current trends it’s going up and there is nothing that indicates it’s going to go down anytime soon. Some of the latest data that’s come out indicates record-low nationwide inventory levels of recycled fiber availability, all-time demand for all recycled fibers across the board. And so, unless something happens to the marketplace in the world, I don’t see that changing. … We build ourselves around flexibility, and we still remained the lowest dependent on [old corrugated containers] as an example compared to the rest of the industry. We can take advantage of it, but again, we’re always mindful of maintaining our flexibility and fiber utilization.”

He concluded, “We will also continue to implement our previously announced price increases in both our Packaging and Paper segments. Our annual outage costs will be lower with one outage in the third quarter versus four mill outages in the second quarter. Inflation associated with most of our operating costs as well as freight and logistics expenses is expected to continue. Energy costs will also be impacted due to higher seasonal usage, and wood costs in our southern mills will be higher due to wet weather, low inventory and high demand. Considering these items, we expect third-quarter earnings of $2.37 per share.”

Oklahoma-based American Waste Control (AWC) has selected Eugene, Oregon-based Bulk Handling Systems (BHS) to supply a replacement of the company’s single-stream recycling system that was heavily damaged by a fire this spring.

According to BHS, the new material recovery facility (MRF) system in Tulsa, Oklahoma, will boost throughput by 33 percent and increase AWC’s targeted recovery performance on its fiber and container lines with the addition of the latest BHS optical and robotic sorting.

The new design includes BHS “no wrap” Tri-Disc screens, National Recovery Technology (NRT) optical and Max-AI artificial intelligence (AI) technologies. Max-AI technology has been designed to identify recyclables similar to the way a person does, plus collect and report material characterization information.

As part of the new AWC system, nine Max-AI AQC (Autonomous Quality Control) robotic sorters will identify and pull residue and return recyclables from sort positions. The robotic sorters include a Max-AI AQC-C unit, plus a CoBot that is designed to work alongside people and can be installed on narrow walkways and other tight locations with minimal structural requirements and footprint.

“The industry has changed, and this new system will bring Tulsa to the forefront of recycling excellence,” says AWC Vice President of Recycling Robert Pickens. “BHS offers the overall quality, partnership and advanced technology to help AWC achieve the throughput and quality to meet our business goals. We believe the future of recycling will rely heavily on using technology and data to optimize performance and the Max-AI and NRT equipment in this system will deliver that for our operation. We are excited for our future and confident that this innovative technology will empower us to meet recycling expectations for our community and for our business.”

BHS Sales Director Paul Holman comments, “This single-stream system is an excellent example of new technology being used to adapt to change in the industry. The system features proven screen technology to increase throughput and precisely present material downstream to NRT and Max-AI sorters to maximize both recovery and product purity. We are thrilled to deliver this creative solution to meet our customer’s business objectives. I want to thank the AWC team for choosing BHS and we look forward to our future collaboration.”

BHS describes itself as a worldwide leader in the innovative design, engineering, manufacturing and installation of sorting systems and components for the solid waste, recycling, waste-to-energy and construction and demolition industries.